Question 1

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the value of the deadweight loss after the imposition of the price floor?

Accepted Answer

The answer of 
-Refer to Figure 5-5. Suppose that instead...

Question 2

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the value of consumer surplus after the imposition of the price floor?

Accepted Answer

The answer of 
-Refer to Figure 5-5. Suppose that instead...

Question 3

Economists are reluctant to state that price controls are desirable or undesirable because

Accepted Answer

Economists are trained to provide analysis based on economic theory and data, but when it comes to determining whether a particular policy is good or bad, it is a normative judgment that is beyond their expertise, as it requires considering ethical, political, and social factors. Therefore, economists can provide information on the potential economic consequences of price controls, but it is up to policymakers and society to decide whether the benefits outweigh the costs.

Question 4

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the value of producer surplus after the imposition of the price floor?

Accepted Answer

With a price floor of $2000 per month, 500 apartments will be supplied and 160 apartments will be demanded, resulting in a surplus of 340 apartments. The producer surplus can be calculated as the area of the triangle below the price floor and above the supply curve: 
(1/2) x ($2000-$400) x 500 = $450,000
However, since only 160 apartments will be rented out, the actual producer surplus is the rectangle below the price floor and above the equilibrium quantity: 
($2000-$400) x 160 = $240,000. Therefore, B is the correct answer.

Question 5

Rent control is an example of a price ceiling.

Accepted Answer

Rent control imposes a legal maximum set price on rent, which is an example of a price ceiling.

Question 6

What is the difference between a price ceiling and a price floor? Compared to the competitive equilibrium price, where must price ceilings and price floors be set to have an effect on the market.

Accepted Answer

The answer of What is the difference between a price...

Question 7

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the value of the portion of consumer surplus transferred to producers as a result of the price floor?

Accepted Answer

The answer of 
-Refer to Figure 5-5. Suppose that instead...

Question 8

The minimum wage is an example of a price ceiling.

Accepted Answer

The answer of The minimum wage is an example of...

Question 9

Companies in the sharing economy have the potential to lower the equilibrium price in their market, and by doing so increase efficiency. This would have a tendency to

Accepted Answer

By lowering equilibrium price, companies in the sharing economy are able to make their goods and services more affordable and accessible to consumers, which increases consumer surplus. At the same time, the increase in efficiency also decreases deadweight loss. While there may be some decrease in producer surplus, overall the benefits of increased consumer surplus and decreased deadweight loss outweigh this cost. Therefore, B is the best choice.

Question 10

Shortage means the same thing as scarcity.

Accepted Answer

The answer of Shortage means the same thing as scarcity....

Question 11

In order to be binding, a price ceiling

Accepted Answer

A price ceiling is set below the free market equilibrium price in order to ensure that goods or services are more affordable for consumers. If the price ceiling is set above the equilibrium price, it will have no effect on the market because the market price is already lower than the ceiling. If the ceiling is set at the same level as the equilibrium price, there is no need for a ceiling because the market is already operating efficiently. Lastly, the profitability of firms is not relevant to whether a price ceiling is binding or not.

Question 12

A price ceiling is a legally determined maximum price that sellers may charge.

Accepted Answer

A price ceiling is a legally determined maximum price that sellers may charge.

Question 13

Which term refers to a legally established minimum price that firms may charge?

Accepted Answer

A price floor is a legally established minimum price that firms may charge.

Question 14

Which of the following is not a result of government price controls?

Accepted Answer

This statement is not entirely true. While price controls may initially benefit poor consumers, it can ultimately harm them in the long run as it may result in shortages and decreased quality of goods. Additionally, not all producers will be harmed by price controls as some may have lower costs of production, allowing them to continue producing at the controlled price.

Question 15

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the quantity of apartments demanded at the new price?

Accepted Answer

At a price floor of $2000, the quantity of apartments demanded would decrease to where the demand curve intersects the price floor, which is at 200 apartments.

Question 16

A minimum wage law dictates

Accepted Answer

A minimum wage law sets the lowest wage that firms can pay for labor. It does not dictate the minimum quantity of labor that a firm must employ or the qualifications for labor. Nor does it set the highest wage that firms must pay for labor.

Question 17

In the economic sense, almost everything is scarce. ________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

Accepted Answer

A shortage occurs when there is not enough of a good or service to meet demand at the current market price. This is different from scarcity, which is a fundamental economic concept that refers to the limited availability of resources in general. A surplus, on the other hand, occurs when there is more of a good or service available than is demanded at the current market price, and an overstock is simply an excess amount of something that is not necessarily related to market dynamics.

Question 18

Black markets only exist in developing nations.

Accepted Answer

Black markets exist in both developing and developed nations.

Question 19

Which of the following is not a result of imposing a rent ceiling?

Accepted Answer

The answer of Which of the following is not a...

Question 20

In cities with rent controls, the actual rents paid can be higher than the legal maximum. One explanation for this is

Accepted Answer

Rent control laws create a shortage of apartments as landlords are not incentivized to build new ones or maintain existing ones due to the low legal rents they can charge. As a result, there is often a high demand for a limited supply of apartments, leading tenants to be willing to pay more than the legal maximum in order to secure a place to live.

Quiz 5: Economic Efficiency , Government Price Setting and Taxes

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the value of the deadweight loss after the imposition of the price floor?

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the value of consumer surplus after the imposition of the price floor?

Economists are reluctant to state that price controls are desirable or undesirable because

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the value of producer surplus after the imposition of the price floor?

Rent control is an example of a price ceiling.

What is the difference between a price ceiling and a price floor? Compared to the competitive equilibrium price, where must price ceilings and price floors be set to have an effect on the market.

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the value of the portion of consumer surplus transferred to producers as a result of the price floor?

The minimum wage is an example of a price ceiling.

Companies in the sharing economy have the potential to lower the equilibrium price in their market, and by doing so increase efficiency. This would have a tendency to

Shortage means the same thing as scarcity.

In order to be binding, a price ceiling

A price ceiling is a legally determined maximum price that sellers may charge.

Which term refers to a legally established minimum price that firms may charge?

Which of the following is not a result of government price controls?

-Refer to Figure 5-5. Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments. What is the quantity of apartments demanded at the new price?

A minimum wage law dictates

In the economic sense, almost everything is scarce. ________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

Black markets only exist in developing nations.

Which of the following is not a result of imposing a rent ceiling?

In cities with rent controls, the actual rents paid can be higher than the legal maximum. One explanation for this is